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MERGERS AND ACQUISITIONS PSA OPEL TIE-UP
PSA close to deal to acquire GM's Opel unit, reports say
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From wire reports
Automotive News Europe
March 2, 2017 19:11 CET
PSA Group is closing in on a deal to acquire General Motors' Opel unit to create Europe’s second-largest automaker, with an agreement possibly coming early next week, sources told Bloomberg and Reuters.
Both companies are planning to continue intense negotiations through the weekend with the aim of announcing a deal on Monday, Bloomberg reported on Thursday, quoting people familiar with the situation. The complexity of talks could lead to a delay, the people said.
The two automakers are said to be narrowing differences over pension liabilities, Reuters reported. GM’s pension plan for Opel and Vauxhall retirees is underfunded by about $9 billion, according to Bloomberg. PSA would like GM to keep a big chunk of that responsibility, sources said.
In a sign that talks have progressed, a meeting between PSA management and top European labor union officials has been tentatively scheduled for next week, one of the people said.
PSA confirmed the potential union meeting but said it could be canceled or postponed, adding that talks were ongoing and that the carmakers haven’t set a timeline. A spokesman for GM’s European unit declined to comment.
One of the key negotiating points is how PSA can achieve about 2 billion euros ($2.1 billion) in savings from a deal, said one of the people. These would come largely from potential future capacity reductions as well as savings from joint purchasing, sharing more parts and lowering overhead costs, the person said.
PSA CEO Carlos Tavares plans to revive GM’s unprofitable Opel and Vauxhall brands with a restructuring similar to his project that brought the maker of Peugeot and Citroen cars back from the brink over the past three years. Opel, based near Frankfurt, could in turn serve as a growth driver with potential for expansion beyond its home region, a role that was limited under GM’s ownership, Tavares said last week.
Sales volume is critical in Europe’s largely saturated mass-market segment, and adding GM’s roughly 1.2 million in annual deliveries in the region would help PSA spread the cost of developing new cars and engines across a larger number of vehicles.
Another issue in the talks is how GM and PSA will manage the pension plan for Opel retirees, people familiar with the discussions have said. The program is underfunded by about $9 billion, according to data compiled by Bloomberg. Other complex questions to resolve include licensing fees for technology used in Opel cars and plans to cut production capacity
Advanced negotiations
Things are advancing as they should," one source close to PSA told Reuters. "There's a sense of confidence now."
Spokespeople for PSA and Opel declined to comment.
The two carmakers confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by PSA, sparking widespread concern over possible job cuts.
The first models jointly developed under an existing five year-old partnership with PSA and Opel will be on display at the Geneva show, which opens to the press on Tuesday.
Tavares said last week a full acquisition of Opel offered an "opportunity to create a European car champion" and quickly exceed 5 million annual vehicle sales.
Pension impasse
The talks appeared to reach an impasse this week as GM demanded restrictions on Opel sales in China in return for covering part of the pensions hole, people with knowledge of the matter said. GM had also sought to limit its pensions contribution to $1-2 billion, one said.
Analysts including Alexis Albert at Barclays put GM's European pensions deficit between $8 billion and $10 billion, with Opel's German operations accounting for the lion's share and the British Vauxhall unit for $1.1 billion.
PSA signaled to GM that it could not do a deal in which it shouldered the bulk of the pensions deficit, several sources said. GM CEO Mary Barra publicly sounded a circumspect note when asked about an Opel sale on Tuesday.
"We've done a lot to improve the business but we're exploring opportunities to see if we can accelerate that even more because scale does matter in this business," Barra told reporters.
The carmakers have since narrowed the gap on pensions and the so-called "non-compete" agreements sought by GM, sources said, although it remains unclear how or whether they have been resolved.
"We are making progress every day," said another Paris-based source.
In his public comments on Feb. 23, PSA's Tavares said he saw export potential for the Opel brand under PSA ownership. However, much of the existing Opel lineup would remain dependent for years on technology and parts shared with other GM brands.
GM has been pressing for a deal barring those legacy Opel models from markets including China, Russia and Latin America, sources have said.
Tavares also told his board that PSA would rapidly redevelop the core Opel lineup with its own technologies to achieve swift cost savings, sources told Reuters last week.
Bloomberg and Reuters contributed to this report
Secondo Bloomberg l'accordo tra GM e PSA per il passaggio di Opel alla casa francese sarà firmato la settimana prossima.
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